Question:
PROCESS COSTING, SERVICE ORGANIZATION A local barbershop cuts the hair of 1,000 customers per month. The clients are men, and the barbers offer no special styling. During the month of March, 1,000 customers were serviced. The cost of haircuts includes the following:
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Direct labor
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$ 7,000
|
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Direct materials
|
1,000
|
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Overhead
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2,000
|
|
Total
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$10,000
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Required:
1. Explain why process costing is appropriate for this haircutting operation.
2. Calculate the cost per haircut.
3. Can you identify some possible direct materials used for this haircutting service? Is the usage of direct materials typical of services? If so, provide examples of services that use direct materials. Can you think of some services that would not use direct materials?